Minimizing Amazon Long-Term Storage Fees in 2023: An Expert Seller‘s Guide

As an experienced Amazon seller, I know first-hand the headaches Long-Term Storage (LTS) fees can cause. Getting hit with large unplanned storage fees every month hurts your bottom line.

The key is staying vigilant in monitoring your inventory health and taking proactive steps to keep products moving.

In this comprehensive guide, I‘ll explain everything sellers need to know to avoid accumulating slow-moving inventory and minimize expensive LTS fees.

What Are Amazon Long-Term Storage Fees?

Amazon charges Long-Term Storage fees on inventory that sits unsold in FBA warehouses for over 1 year. These fees incentivize rapid inventory turnover.

LTS fees apply on a monthly basis to eligible ASINs, starting on the 15th day of each month. They are assessed in addition to the standard FBA monthly storage fees.

How Long-Term Storage Fees Are Calculated

Amazon calculates LTS fees based on the greater of:

• $0.15 per unit
• $6.90 per cubic foot

For example, if you had 300 units that took up 18 cubic feet of storage:

• Per unit fee: 300 x $0.15 = $45
• Cubic foot fee: 18 x $6.90 = $124.20

In this case, the cubic foot fee is greater, so you would pay $124.20.

But for a very dense, small product, the per unit fee might exceed the cubic foot rate. Amazon always charges you the higher amount.

Here are the LTS fee rates as of January 2023:

Rates subject to change by Amazon

You can reference the FBA Inventory Age report in Seller Central to see LTS fee estimates on your current inventory.

Why Does Amazon Charge Long-Term Storage Fees?

Amazon fulfillment centers can only hold so much inventory. Storage space is limited.

By charging LTS fees on older, neglected products, Amazon incentivizes sellers to keep merchandise moving quickly through their system.

Rapid inventory turnover allows them to free up room for newly arriving in-demand products. This optimization helps them meet customer expectations for vast selection and fast delivery.

According to Amazon:

"Long-term storage fees encourage sellers to regularly review and manage their inventory in our fulfillment centers to ensure that customers are receiving products that meet their needs."

In 2021 alone, Amazon processed 5.4 billion units of third party seller inventory globally. The sheer scale makes inventory optimization imperative.

As a seller, it‘s in your own interest to avoid LTS fees racking up on overstocked, slow-moving merchandise. This ties up working capital unnecessarily.

Now let‘s explore strategies to minimize LTS exposure…

How to Avoid Amazon Long-Term Storage Fees

With rigorous inventory management, savvy Amazon sellers can keep products flowing quickly and minimize LTS fees. Here are the top techniques I recommend:

1. Frequently Analyze Inventory Reports

Regularly monitoring your FBA reports helps identify issues leading to slow turnover early before inventory ages excessively.

Key Reports to Review:

• FBA Inventory Age: Shows age breakdown of current inventory and LTS fee estimates
• Stranded Inventory: Highlights products with zero sales
• Inventory Health: Flags excess on-hand quantity and low sales velocity
• Sales & Inventory: Analyze weekly demand relative to weeks of supply

Here are warning signs to watch for:

• High number of 0 sales weeks
• Low sales velocity (units sold/week)
• Excess weeks of supply relative to demand
• Inventory depth significantly above ideal level

Diagnosing the root cause of stagnant inventory is critical. Common reasons include:

• Pricing too high
• Changes in product demand
• Poor product quality
• Excess inventory depth
• Seasonal slow periods

Address price, promotions, or replenishment accordingly.

Monitoring the FBA Inventory Age report helps identify LTS risks

2. Run Promotions to Spark Sales

Promotions are a great way to reinvigorate sales of slower moving legacy inventory.

Some of the most effective promotions to liquidate older stock include:

• Discounts – e.g. 15-25% off
• BOGO deals – Buy 1 get 1 free
• Bundled offers -Discount when buying 3+ units
• Free shipping

I recommend at least a 3-5 day promotion duration for maximum impact. Time promotions around peak shopping days or seasons.

Coordinate promotions across all of your sales channels for multiplier effect.

You can easily set up automated Seller Central promotions targeted specifically at LTS-eligible ASINs.

3. Remove From FBA and Return to Your Warehouse

If promotions don‘t trim down older inventory, removing it from FBA is often the next best step.

You can issue a removal order to ship units back to your own warehouse or third-party logistics (3PL). This immediately stops further FBA storage fees from accumulating.

Just factor in added inbound shipping costs when resending to Amazon later. Storage at your warehouse is often still cheaper than paying FBA monthly storage and LTS fees.

4. Dispose of Obsolete & Expired Inventory

For inventory confirmed to be expired or unsalable, disposing through FBA can be the most cost-effective solution.

You can request disposal of entire ASINs or a specified number of units. After disposal Amazon charges a fee around $0.50 per unit.

This eliminates continuing storage fees and frees up warehouse space for healthy inventory. Disposal can be executed easily right from your Seller Central account.

5. Optimize Replenishment Rules to Prevent Overstocks

If excess inventory stems from poor restocking practices, take steps to refine your reorder points and buffers.

Build in larger safety stock cushions and minimum order quantities. This prevents frequent reorders of slow-moving items.

I recommend sizing your replenishment quantities based on these factors:

• Average sales velocity – Units sold per week
• Lead time – Time from order to received in FBA
• Seasonality – Forecasted demand fluctuations
• Buffers for variance in demand

Proactively limiting inventory depth is crucial for minimizing LTS risk exposure.

Recommended buffer:

Minimum Reorder Point = (Avg. Weekly Sales * Lead Time) + Safety Stock  

Safety Stock = (Avg. Weekly Sales * Lead Time) * Buffer %

6. Leverage Repricing Software to Optimize Prices

Manually monitoring and adjusting prices across thousands of SKUs is virtually impossible.

That‘s why I rely on automated repricing tools like Sellery to dynamically optimize prices 24/7.

Intelligent algorithms factor in time-based inventory age, sales trends, and competitor pricing to determine optimal prices. This keeps inventory competitively priced and moving.

Repricers are especially helpful for honing in on ideal discount rates on older units that need an extra push.

Avoiding Other FBA Storage Fees

In addition to Long-Term Storage fees, sellers should be aware of other relevant FBA storage charges:

FBA Monthly Inventory Storage Fees

Amazon bills standard storage fees ranging from $0.69 – $2.40 per cubic foot monthly, depending on inventory dimensions. Plus a $0.30 per unit fee for smaller items.

FBA Removal Order Fees

Disposing of unsalable/expired units costs around $0.50 per unit, plus applicable return shipping costs.

FBA Multi-Channel Fulfillment

Non-Amazon orders fulfilled by FBA incur inventory storage and order processing fees. But no LTS fees.

Staying on top of all FBA storage costs helps guide optimal inventory planning decisions.

Key Takeaways on Minimizing LTS Fees

Here are some of the essential tips I‘ve learned for reducing Long-Term Storage fees as an experienced FBA seller:

• Monitor inventory age reports frequently to catch issues early
• Diagnose and resolve root causes of excess slow-moving stock
• Run aggressive promotions to liquidate older inventory
• Remove ineligible inventory for cheaper storage elsewhere
• Dispose of confirmed unsalable units via FBA removals
• Carefully manage replenishment to prevent overstocks
• Use repricing software to dynamically optimize prices
• Understand all FBA storage fee types (monthly, LTS, etc)

Following these best practices helps ensure your products keep moving quickly through FBA while avoiding unnecessary LTS fees. This maximizes profits and return on your inventory investment.

Despite your best efforts, if you ever see LTS fees incorrectly charged on your account, you can request adjustments through Amazon Seller Support.

I hope this guide provides helpful tips and strategies to minimize expensive Long-Term Storage fees and streamline your FBA operations. Please reach out with any other questions!